What Is My Status For Tax Residency Purposes?

Knowing your tax residence status is essential if you work abroad but still have some connection to the UK. Your living status defines whether you will pay taxes on foreign income you make. For instance, if you went abroad recently, returned after months, or have a residency but visit often, this status shows how you will pay taxes according to UK laws. If you ignore paying these taxes, it can lead to penalties and heavy fines.

HMRC initiated the ‘statutory reliance test’ to assist individuals with a connection to the UK and determine their status for paying tax. This detailed guide will explore your residency status and how the test will help determine if your foreign income is subject to UK taxes. 

How Can I Work Out My Tax Residence Status?

If we talk about UK tax status, individuals fall into two categories.

• UK Resident Individuals
• Non-UK Residential Individuals

Knowing which one you are largely depends on how many days you spend in the UK during the tax year. 

 You are categorised as a UK resident if you:

• Don’t meet any automatic overseas test
• Meet anyone automatic UK test

If you don’t meet these conditions, you will be considered a non-resident in the UK for tax purposes.

What are the Working Criteria of the UK Automatic Test?

You will be categorised as a UK resident if you meet the following criteria while taking the test:

• You have spent at least 183 days in the UK for the tax year.
• Your only home was in the UK for 91 days, and you visited or stayed here for at least 30 days during the tax year.
• You worked full-time in the UK for a specific period in that tax year.

How Does the Overseas Test Work?

If you are considered a non-resident for tax purposes, you won’t need to pay any UK tax on foreign income. 

This will be implemented if you: 

• Spend less than 16 days in the UK. (An additional condition is that “if you haven’t been a UK resident for the past three years, you need to spend fewer than 46 days there.” 
• Work abroad for an average of 35 hours per week and have spent less than 91 days in the UK, 30 of those days being working days.

If you don’t pass the automatic UK test or overseas test, your residency will depend upon the number of connections you have in the UK. A “Sufficient Ties Tax” will be performed to know your total UK connection, including (family, work accommodations, etc).

What happens if I meet the criteria for UK tax residency?

If you are deemed a UK tax resident, you must pay UK taxes regardless of your job outside the UK unless your domicile is considered abroad.

You have to pay taxes on 

• Any Foreign Investment, including saving interest 
• Any rent you receive from overseas property
• If you hold any income from any overseas pension 
• The salary you take from abroad job.

Does my tax residency status differ annually for tax purposes?

Your tax residency status can change yearly, depending on new updates or other circumstances. Let us explain with an example.

For example, your job can change, or you spend more or less time in the UK. You might also get married, have children, or get separated.

You must check your residency status each tax year to see if something has changed since the last time you checked.

What If I Have Already Paid Tax on Foreign Income?

If you’ve incurred taxes on foreign income, you can seek Tax Credit relief when declaring your overseas earnings on your self-assessment tax form. The relief you receive relies on the country your income has come from and its taxation agreement with the UK. If there’s no agreement, you’ll still receive relief unless the foreign tax doesn’t comply with either UK Income Tax or Capital Gains Tax.

Do I need assistance in completing the statutory residence test?

HMRC’s online tool should make the process much more straightforward, whether you’re a UK resident or not. You’ll need to select the tax year you’re referring to and answer a range of questions, such as 

• How many days did you spend in the UK that tax year?
• How many of those days have you worked?
• Other questions include whether you had a home in the UK during this period.
• How long have you spent in that home?